EconPapers    
Economics at your fingertips  
 

Household Debt and Monetary Policy: Revealing the Cash-Flow Channel

Martin Flodén (), Matilda Kilström, Jósef Sigurdsson and Roine Vestman ()
Additional contact information
Matilda Kilström: IIES, Stockholm University
Jósef Sigurdsson: IIES, Stockholm University
Roine Vestman: Stockholm University and SHoF

No 342, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We examine the cash-flow channel of monetary policy, i.e. the effect of monetary policy on spending when households hold debt linked to short-term rates such as adjustable rate mortgages (ARMs). Using registry-based data on Swedish households, we estimate substantial heterogeneity in consumption responses to a change in monetary policy through the cash-flow channel. Our findings imply that monetary policy has a stronger effect on real economic activity when households are highly indebted and have ARMs. For homeowners with a debtto- income ratio of around 3 and ARMs, the estimated response is equivalent to a marginal propensity to consume of 0.5.

Keywords: Monetary policy; consumption; household debt; variable interest rates; adjustable rate mortgages (search for similar items in EconPapers)
JEL-codes: D14 E21 E52 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eur, nep-mac and nep-mon
Date: 2017-09-01
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.riksbank.se/Documents/Rapporter/Working_papers/2017/WP342.pdf (application/pdf)

Related works:
Working Paper: Household Debt and Monetary Policy: Revealing the Cash-Flow Channel (2017) Downloads
Working Paper: Household Debt and Monetary Policy: Revealing the Cash-Flow Channel (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0342

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Series data maintained by Lena Löfgren ().

 
Page updated 2017-11-24
Handle: RePEc:hhs:rbnkwp:0342